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FERC Returns to Full Strength and Faces Key Decisions

Dec. 8, 2017 – This blog was updated to reflect FERC Chair McIntyre’s request for a 30-day delay in acting on the DOE request to bail out coal and nuclear plants.

After months of delay, Kevin McIntyre was sworn in today as the newest chairman of the Federal Energy Regulatory Commission (FERC), the independent federal agency that oversees the electric power grid and gas pipeline permit approvals. This also puts FERC at full strength with five commissioners for the first time since October 2015.

To say that McIntyre joins FERC at an important time would be an understatement. The agency is at a crossroads. As an independent commission, FERC has largely avoided pressure from the White House and Congress in recent years, and hewed mostly to a non-partisan (if not always harmonious) path.

In the last several months, however, FERC has faced unprecedented pressure from the Trump Administration to subsidize coal plants and nuclear for their claimed resilience” attributes. McIntyre’s leadership will be a test of the extent to which he can withstand pressure from the White House to bend to its political ends.

McIntyre, formerly the co-leader of Jones Day’s global energy practice, is taking over FERC’s leadership from Neil Chatterjee, Mitch McConnell’s former energy advisor. Trump nominated Chatterjee to FERC and then to head it as of August 8, 2017, but also announced he wanted McIntyre to eventually be the chair. The Senate confirmed McIntyre and Rich Glick on November 2 (Glick most recently was Democratic General Counsel for the Senate Committee on Energy and Natural Resources.)

Comprising the full five member Commission are McIntyre, Chatterjee, Glick, Trump appointee Robert Powelson (ex-Pennsylvania utility commissioner) and Cheryl LaFleur, who joined FERC in 2010.

What will FERC do with the DOE proposal?

The most pressing matter before FERC is the highly controversial Department of Energy (DOE) proposal to require FERC to order power market operators in some regions of the country to bail out expensive and uncompetitive coal and nuclear power plants, significantly increasing consumers’ energy bills. Seizing on a rarely used provision of the Federal Power Act allowing the DOE to propose rules for FERC to consider, DOE’s proposal was without evidence to support it, was written without consulting FERC or the public, and appears heavily influenced by Trump supporters like Robert Murray (of Murray coal fame), FirstEnergy, and other coal-heavy interests.

We and many others told FERC in our public comments why the DOE’s proposal, crafted in the name of grid “resilience,” was built on a foundation of misrepresentations. The proposal would not make the grid more resilient. Economists, industry groups, consumers, power grid operators, and many others were united in their opposition to DOE’s proposal. It even drew the condemnation of eight former FERC chairmen and commissioners who panned the proposal as a “significant step backward” that would “raise costs for customers, and do so in a manner directly counter to FERC’s long experience.”

McIntyre joined FERC today, and FERC was asked to act on DOE’s proposal as early as December 11. McIntyre, who was tasked with coming up to speed in record time, quickly asked for a 30-day delay. Even so, FERC still could respond in many ways, from doing nothing, to ordering affected grid operators to immediately comply with DOE’s proposal to bail out coal and nuclear generators.

Adopting DOE’s approach would mean supporting specific technologies and resources in contravention of the Federal Power Act’s fuel-neutral approach. A far better response would be to reject the DOE proposal and instead conduct a rational investigation into whether rules to make the grid more resilient are appropriate, and if so, what measures should be taken to accomplish that goal. Should FERC listen to experts across the industry, the solution will look nothing like DOE’s proposed coal and nuclear bailout.

PJM’s subsidy proposal also a problem

Also facing McIntyre and the commission will be plans by PJM, the nation’s largest power grid operator, to boost payments to coal and power plants in its markets (as opposed to insulating them from market competition entirely as DOE proposes to do). Yet as with the DOE proposal, consumers in 13 states and the District of Columbia would suffer under PJM’s plan. Also like the DOE proposal, PJM has yet to provide the evidence as to why additional payments are necessary, especially given the chronic oversupply of power plants in the PJM region, which is one of the causes of low market prices. PJM’s idea faced early criticism from the economic market monitor experts in other regions of the country. One market monitor, for example, criticized PJM’s concept as “highly inefficient and destructive to existing energy markets.”

Other major pending issues

In addition to these two high-profile proceedings, FERC faces other thorny issues. For example, there is pressure on FERC to essentially override state energy policy choices by creating rules in FERC-regulated power markets that counteract them. This would raise costs and discount some of the clean energy value of these programs. The power grid operator for New England is preparing a proposal to submit to FERC that will tackle this subject. Earlier this year FERC looked at how to harmonize state energy policies with power markets, and it’s sure to be a recurring theme at FERC.

On the natural gas side, FERC is going to continue to hear concerns about its pipeline approval process. Commendably, Commissioner LaFleur dissented in FERC’s recent approvals of the Mountain Valley Pipeline and Atlantic Coast Pipeline projects, arguing that they were not in the public interest based on the evidence. Among other things, she questioned whether regional needs were assessed correctly, and whether alternatives were available. She didn’t ask the question in her dissent, but we will – does FERC’s nearly 20-year-old framework for reviewing gas pipelines need reforms? We think so.

Focus on the public interest, not helping politically-connected companies

As McIntyre takes the reins of FERC, it’s incumbent upon him and the rest of the commission to reassert FERC’s independence from political interference and reject efforts to favor specific fuels like coal and nuclear in its policies. The focus, as always, needs to be on the touchstone Federal Power Act standard of assuring just and reasonable rates, and avoiding (undue) discrimination. Yes, they are legally loaded terms, but at heart they require FERC to act in the public interest, not at the behest of politically connected companies. And what happens is going to matter a lot to consumers’ pocketbooks and reliable and efficient electricity service.